BrandPartners former executive named in counter lawsuits

Friday

Apr 30, 2010 at 3:15 AMApr 30, 2010 at 5:30 AM

By JOEY CRESTAjcresta@fosters.com

ROCHESTER — What truly happened when Gonic business BrandPartners closed on April 16 remains a mystery. Former employees were left reeling; the Department of Labor is investigating complaints of unpaid wages and other circumstances surrounding the closure. And charges and countercharges have been filed in court between company executives.

In filings in U.S. District Court of New Hampshire, a former executive alleges CEO James F. Brooks intimated to him a plan in January 2009 to leave BrandPartners an "empty shell" and form a new company to get out from under a $6 million loan owed to a creditor.

Meanwhile, BrandPartners alleges the former executive, Frank J. Beardsworth of Dover, stole company secrets in an effort both to start a rival company and assist a rival company in Pittsburgh, Penn. where he is currently employed as executive vice president of retail communications.

@Subhead:An unceremonious end

Some BrandPartners employees say they knew the end was coming. They claim to have seen the writing on the wall. Still, when BrandPartners suddenly closed after 27 years in business as a retail design company for the financial services industry, it left landlords with empty office space and employees without work. The company had already laid off 30 people prior to its closing.

Just two months before the closure, according to a Yahoo! Finance report on Feb. 3, BrandPartners Group, Inc. announced the signing of new contracts totaling $4.6 million and $900,000 in letters of intent in January. At the time, Brooks was quoted as saying the new contracts, along with the launch of the Store in a Box subsidiary, "position the company to prosper in two areas that are growth industries for the foreseeable future."

So what changed the company's fortunes in two months?

@Subhead:"Dire Financial Straights"

According to a lawsuit filed against BrandPartners for unpaid rent in April, Brooks was quoted as saying the company was in "dire financial straights."

Beardsworth, who joined the company on July 17, 2000, to work in the MIS department, later rose to the level of executive vice president of merchandising and retail communications. He claims, in a countersuit against BrandPartners, he had a series of conversations with Brooks about a mezzanine loan with a principal balance of $6 million that the company owed to a creditor.

Beardsworth alleges Brooks said if he could not get the loan reduced to $2 million, his second option was to default on the loan, rename the parent company to distance it from the "noise created by the default," form a new company to replace BrandPartners and move equipment and key employees to the new company to continue serving existing clients.

"In other words, Mr. Brooks intended to drain BrandPartners of all significant assets thus leaving an empty shell for BrandPartners' creditors and shareholders," the lawsuit alleges, adding, "Mr. Brooks also stated on multiple occasions that he did not care what impact his plan had on BrandPartners' current investors and/or shareholders."

After March furloughs, former vice president of marketing Pam Watson told Foster's Brooks was planning to head up Energy Service Partners and Store in a Box, two new divisions of the company.

The lawsuit claims Beardsworth was concerned by Brooks' plan and brought it to the attention of other employees. The group of concerned employees brought the issue to the board of directors. Despite assurances, the suit claims, some employees were terminated soon after meetings with the board and attorneys.

Beardsworth kept his job, and the suit claims "Mr. Brooks told Mr. Beardsworth that BrandPartners would have also terminated his employment, but they were concerned that he might be considered a whistle-blower."

The lawsuit claims Brooks abused and harassed Beardsworth about retracting his complaints, and as such, Beardsworth submitted his resignation, effective Aug. 21, 2009.

Beardsworth has filed claims of wrongful termination, breach of contract and failure to receive paid sick leave and vacation upon discharge as a result. Those filings were made in December 2009.

@Subhead:Trade Secrets

Beardsworth's allegations are in response to a lawsuit BrandPartners originally filed in Strafford County Superior Court well before its closure. The company alleges Beardsworth "abused the trust and confidence placed in him by, among other things, actively establishing one or more competing enterprises; misappropriating BrandPartners' trade secrets; and improperly retaining BrandPartners' confidential and proprietary information and trade secrets after he left the company and while employed by a BrandPartners' competitor."

The suit claims BrandPartners was an industry leader; when it was filed in October 2009, and the company had more than 200 clients across the country, including some of the nation's largest national and regional banks. The suit claims the company operated in a "highly competitive environment" and its success was in large part due to developing confidential, proprietary and trade secret information.

Beardsworth allegedly had access to that information and told co-workers in 2008 that Brooks "has no idea how fast I could bury this company. I know the pricing/margins etc. I could start my own company or go anywhere else and bury this company," according to court documents.

"For more than a year prior to his departure from BrandPartners in August 2009, Beardsworth began to pursue various business ventures that directly conflicted with his employer's interests," the suit claims.

Specifically, the lawsuit alleges Beardsworth tried to establish Display Innovation, LLC, a company that would directly compete with BrandPartners. The suit cites instances when Beardsworth allegedly accessed confidential files, sent e-mails discussing his activities and fielded phone calls from associates of a rival company while employed by BrandPartners.

He allegedly sought employment with competitor PW Campbell Contracting Company and actively assisted PW Campbell while still employed by BrandPartners, according to the lawsuit.

PW Campbell is based out of Pittsburgh, Penn. According to the company website, Beardsworth is now its executive vice president of retail communications. The lawsuit claims PW Campbell hired Beardsworth on Aug. 26, 2009, just six days after he left BrandPartners.

On the same day he submitted his resignation, Beardsworth allegedly used "CCleaner," a computer program that cleans traces of online activity, on his work computer, the lawsuit claims. The suit alleges a personal storage device with the company's trade secrets remains in Beardsworth's possession.

The suit asks the court to prevent Beardsworth from accessing, disclosing or using any company information, require him to return the documents to the company and require a complete forensic analysis of all his personal hard drives and memory storage devices.

@Subhead:Pending litigation

The case was closed at the Superior Court level and moved to U.S. District Court on Nov. 12, 2009. A U.S. District Court employee told Foster's the case originally involved a second defendant, D. Christopher Howe. He is a former BrandPartners senior executive who, the lawsuit alleges, conspired with Beardsworth to start a rival company.

The court employee said a stipulation of dismissal had been filed in regard to Howe. The case remains against Beardsworth, with a trial date set for Dec. 7.

In an answer to the allegations filed in court, Beardsworth admits to discussing forming a company called Display Innovation with Howe and discussed potential employment with PW Campbell while he was employed at BrandPartners. Beardsworth's attorney, Donald "Lee" Smith, said his client denies engaging in any wrongdoing.

Smith said he knows nothing more of BrandPartners' closure than what has been reported by the press.

Brooks, who resides in Connecticut, has not returned phone calls seeking comment on this issue. According to his Forbes profile, Brooks made $523,008 in total compensation in 2008, including a $360,000 salary and a $100,000 bonus.

The attorney representing BrandPartners, Gordon MacDonald, also did not return a message Thursday.

The company currently faces one filing alleging owed rent for a Rochester warehouse facility and the owners of the Gonic Mill say they too are considering litigation.

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